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Taxation Managment

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Taxation Management ­ FIN 623
VU
MODULE 16
LESSON 16.42
ADVANCE TAX
COLLECTION & RECOVERY OF TAX
PENALTIES & PROSECUTION
Collection and recovery of tax gorgeous
Due date for payment of taxes (Sec. 137)
Tax shall be due:
On due date for furnishing the return for that tax year
Within thirty days of service of notice, in case of an assessment order passed by the commissioner.
Recovery of tax out of Property and through arrest of Tax-Payer (Sec. 138)
Attachment and sale of any movable or immovable property of tax payer
Appointment of receiver for the management of movable or immovable property of the taxpayer
Arrest of taxpayer and his detention in prison not exceeding six months
Recovery of Tax by District Officer (Revenue) (Sec. 138A)
On a Certificate from Commissioner specified property of taxpayer and amount of tax due.
Collection of tax in the case of private companies and Association of Persons:
If amount of tax due cannot be recovered from the company then it can be recovered from every person
who was at any time in that tax year:
A director of the company, other than employed director
Share holder owning at least ten percent of paid up capital of the company shall be jointly and
severally responsible.
 In case of AOP, if tax due from member in respect of member's share of income of the association for
any tax year cannot be recovered from the member, the association shall be liable for the tax due by the
member.
Recovery of Tax from persons holding money due on behalf of a taxpayer (Sec. 140)
 For the purpose of recovering any tax due by a taxpayer, the commissioner may, by notice, in writing,
require any person
 Owing or who may owe money to the taxpayer; or
 Holding or who may hold money for or on account of the taxpayer;
 Holding or who may hold money on account of some other person for payment to the taxpayer; or
 Having authority of some other person to pay money to the taxpayer
Liquidators (Sec. 141):
Following are referred to as liquidator:
A liquidator of a company
A receiver appointed by a Court or appointed out of court
A trustee for a bankrupt
A mortgagee in possession
 Liquidators shall, within fourteen days of being appointed or taking possession of an asset in Pakistan,
whichever occurs first, give written notice thereof to the commissioner.
 Commissioner shall within three months of being notified to provide the information regarding tax
payable by the person, whose assets are in the possession of liquidators.
 A liquidator shall not, without leave of commissioner, part with any asset held as liquidator until
liquidator has been notified by the commissioner.
 A liquidator:
Shall set aside, out of the proceeds of sale of any asset by the liquidator, the amount notified by the
Commissioner under sub-section 2, or such lesser amount as is subsequently agreed to by the
Commissioner;
Shall be liable to the extent of the amount set aside for the tax of the person who owned the asset;
and
May pay any debt that has priority over the tax referred to in this section notwithstanding any
provision of this section
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Recovery of tax due by non-resident member of an Association of Persons Sec. 142
Non resident ship owner or chatterer (Sec.143)
Non resident aircraft owner or chatterer (Sec. 144)
Assessment of Person about to Leave Pakistan (Sec. 145)
Notify to CIT about probable date of departure not less than fifteen days from said date if he has to leave
country with no intention to return to Pakistan.
 CIT shall give notice to furnish return of taxable income for tax year for which tax payer is required to
file return. Taxable income shall be charged to tax.
 Recovery of tax from Persons assessed in AJK
Penalty
Penalty for failure to furnish a return or statement Sec. 182
Liable for penalty equal to one-tenth of one percent of the tax payable for each day of default subject to a
minimum penalty of Rupees five hundred and maximum penalty of twenty five percent of tax payable in
respect of that tax year.
Penalty for non-payment of tax Sec 183:
Liable for penalty equal to:
a)  In the case of first default, five percent of the amount of tax in default
b)  In case of the second default, an additional penalty of twenty five percent of the amount of tax in
default;
c)  In the case of third default, an additional penalty of twenty five percent of the amount of tax in
default
d)  In the case of a fourth and subsequent default, an additional penalty of up-to fifty percent of the
amount of tax in default and determined by the commissioner, but the total penalty in respect of the
amount of tax in default shall not exceed, one hundred percent of such amount of tax.
Penalty for failure to maintain records Sec. 185
a)
in case of first failure, two thousand rupees
b)  in the case of second failure, five thousand rupees.
c)
in the case of third and subsequent failure, ten thousand rupees.
Penalty for non-compliance with notice: Sec 186
a)  in case of first failure, two thousand rupees
b)  in the case of second failure, five thousand rupees.
c)  in the case of third and subsequent failure, ten thousand rupees.
Penalty for making false or misleading statements Sec 187:
 Where the statement or omission are made knowingly or recklessly, two hundred percent of the tax
short fall; or
 In any other case, twenty five percent of tax short fall
Penalty for failure to give notice Sec 188
 The commissioner may impose a penalty on the person not exceeding the amount of tax payable by the
person for the tax year in which business was discontinued.
 Where a person fails to give notice of the person's appointment as liquidator as required under section
141, the commissioner may impose a penalty on the person not exceeding ten thousand rupees.
Penalty for obstruction Sec 189
Commissioner may impose a penalty not exceeding ten thousand rupees.
Imposition of penalty Sec 190
No penalty may be imposed on any person unless the person is given a reasonable opportunity of being
heard.
Offences & Prosecutions
Prosecution for non-compliance with certain statutory obligations (Sec. 191)
Non-compliance of notice
Non-payment of advance tax u/s 147
Non-collection/deduction of tax
 A person who fails to comply with the provisions of this section shall commit an offence punishable
on conviction with a fine or imprisonment for a term not exceeding one year or both.
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Prosecution for false statement in verification (Sec. 192)
The person shall commit an offence punishable on conviction with a fine or imprisonment for a term
not exceeding three years, or both.
Prosecution for failure to maintain records (Sec.193)
 Where the failure was deliberate, a fine or imprisonment for a term not exceeding two years, or
both; or
 In any other case, a fine shall be imposed.
Prosecution for improper use of National Tax Number card (Sec. 194)
The person shall commit an offence punishable on conviction with a fine or imprisonment for a term not
exceeding two years, or both.
Prosecution for making false or misleading statements (Sec. 195)
-The person shall commit an offence punishable on conviction:
Where the statement or conviction was made knowingly or recklessly, with a fine or imprisonment
for a term not exceeding two years, or both; or
In any other case, with a fine
Prosecution for obstructing an income tax authority (Sec.196)
The person shall commit an offence punishable on conviction with a fine or imprisonment for a term not
exceeding one year, or both.
Prosecution for disposal of property to prevent attachment (Sec. 197)
The person shall commit an offence punishable on conviction with a fine or imprisonment for a term not
exceeding three years, or both.
Prosecution for unauthorized disclosure of information by a public servant (Sec. 198)
The person shall commit an offence punishable on conviction with a fine or imprisonment for a term not
exceeding six months, or both.
Prosecution for abetment (Sec. 199)
- The person shall commit an offence punishable on conviction with a fine or imprisonment for a term
not exceeding three years, or both.
Offences by companies and associations of persons (Sec. 200)
In case of company, every person who at the time, offence was committed, was:
Principal Officer, Director, General Manager, Company secretary or any other similar officer of the
company; or
Acting or purporting to act in that capacity shall be guilty of the offence
Power to compound offences (Sec. 202)
CIT may compound with tax payer/person and order that such person to pay the amount for which
offence may be compounded.
147. Advance tax paid by the taxpayer.
(1) Subject to sub-section (2), every taxpayer whose income was charged to tax for the latest tax year
under this ordinance or latest assessment year under the repealed ordinance other than ­
(a) Income chargeable to tax under the head "Capital Gains";
(b) Income chargeable to tax under sections 5, 6 and 7;
(ba) Income chargeable to tax under section 15;
(c) Income subject to deduction of tax at source under section 149; or
(ca) Income chargeable to tax under section 233 and clauses (a) and (b) of sub-section (1)
of section 233A.
(d) Income from which tax has been collected under Division II or deducted under
Division III and for which no tax credit is allowed as a result of sub-section (3) of
section 168, shall be liable to pay advance tax for the year in accordance with this
section.
(2) This section does not apply to an individual or association of persons where the individual's or
association of persons latest assessed taxable income excluding income referred to in clauses (a), (b),
(ba), (c) and (d) of sub-section (1) is less than one hundred and fifty thousand rupees.
(4) Where the taxpayer is a company, the amount of advance tax due for a quarter shall be computed
according to the following formula, namely:
(A/4) ­ B
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Where:
A is the tax assessed to the taxpayer for the latest tax year or latest assessment year under the repealed
ordinance; and
B is the tax paid in the quarter for which a tax credit is allowed under section 168, other than tax
deducted under section 149 or 155
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MODULE 17
LESSON 17.42
APPEALS AND REFERENCES
FEDERAL TAX OMBUDSMAN
Appeals
Appeal to the Commissioner (Appeals) (Sec.127)
Provided:
Amount of tax due under section 137 has been paid and
Appeal shall be filed:
i)  In prescribed form
ii)  Verification
iii) Grounds of appeal
iv) Prescribed fee
v)  Within 30 days of the date of service of the order against which appeal is filed
Prescribed Fee--In case of appeal against assessment order / notice
Lesser of Rs.1000 or
10% of tax assessed
In any other case:
Companies to pay rupees one thousand
Others rupees two hundred only
Procedure in appeal (Sec.128)
CIT shall give notice of hearing to the appellant and to the commissioner.
CIT, if satisfied may allow an appellant to file any new ground of appeal.
CIT (Appeal) shall not admit any documentary material or evidence which was not produced before
he commissioner unless the commissioner (Appeal) is satisfied that appellant was prevented by
sufficient cause from producing such material or evidence before the commissioner.
Decision in Appeal (Sec.129)
Commissioner of appeal may:
Confirm, modify or annul assessment order.
Order to be passed within three month of date of filing appeal, otherwise the relief sought by the
appellant in the appeal shall be treated as having been given.
Appointment of the Appellate Tribunal (Sec. 130)
 Appellant tribunal shall consist of a chair person, judicial members and accountant members as are
appointed by the Federal Government.
 Qualification of a judicial member:
a)  The person who has exercised the powers of a District Judge and is qualified to be a Judge of a
High Court; or
b)  Is or has been an advocate of a High Court and is qualified to be a Judge of a High Court.
 Qualification of an accountant member:
a)  The person who is an officer of an income tax group equivalent in rank to that of a regional
commissioner
Appeal to Appellate Tribunal (Sec. 131)
Appeal shall be:
In the prescribed form;
Verified in the prescribed manner
Accompanied by prescribed fee
The prescribed fee shall be in case of appeal in relation to an assessment order lesser of:
Two thousand five hundred rupees or 10% of the tax accessed or
In any other case-
If appellant is an company, two thousand rupees; or
Where appellant is not a company, five hundred rupees
Appeal to be filed within sixty days of the order of the commissioner (Appeals)
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Maximum period for staying recovery of tax not beyond six months
The appellate tribunal shall decide appeal within 6 months of its filing.
The appellate tribunal shall communicate its order to the tax payer and the commissioner.
Reference to the High Court (Sec. 133) on a Question of Law
 Reference to High Court may be filed within 90 days of the communication of the order of appellate
tribunal.
 The aggrieved person or the commissioner may prefer an application, in the prescribed form along with
a statement of the case, to the high court, stating any question of law arising out of such order.
 Division Bench of High Court to hear reference application.
 High court to deliver the judgment and copy is sent to Tribunal for giving effect to its judgment.
 Fee of rupees one hundred shall be paid by a person other than the commissioner.
Burden of proof in appeals (sec. 136) on Tax Payers:
 In case of assessment order on the tax Payer, to the extent to which order does not correctly reflect tax
payer's liability for the tax year; or
 In the case of any other decision that the decision is erroneous
Alternate Dispute Resolution
 An aggrieved person may apply to CBR for the appointment of a committee for the resolution of
any hardship or dispute in connection with any matter pending before an appellate authority
 CBR shall appoint a committee for resolution of a dispute consisting of the following:
o  An officer of an income tax
o  Two persons from a panel comprising of Chartered accountants or cost accountants,
Advocates, income tax practitioners, or reputable tax payers.
 The committee after conducting inquiry and
 Seeking expert opinion shall make recommendations in respect of the dispute, as it may deem fit.
 CBR may on recommendations of the committee, pass such order as it may deem appropriate.
 The order passed by CBR in the light of recommendation of the committee shall be submitted
before that authority, tribunal or the court where the matter is subjudic for consideration and
orders as deemed appropriate.
 If tax payer is not satisfied with the said order he may continue to pursue his remedy before the
relevant Authority, Tribunal, or Court.
Federal Tax Ombudsman
This office was established by the "Establishment of the Office of the Federal Tax Ombudsman,
Ordinance, 2000", promulgated by the president on 11/08/2000.
Object:
"To diagnose, investigate, redress and rectify any injustice done to a person through mal-administration by
functionaries administering tax laws".
The term "mal-administration" includes:
(i)  A decision, process, recommendation, act of omission or commission which-
(a) is contrary to law, rules or regulations or is a departure from established practice or procedure,
unless it is bona fide and for valid reasons;
(b) is perverse, arbitrary or unreasonable, unjust, biased, oppressive, or discriminatory;
(c) is based on irrelevant grounds; or
(d) involves the exercise of powers, or the failure or refusal to do so, for corrupt or improper motives,
such as bribery, jobbery, favouritism, nepotism and administrative excesses;
(ii) neglect, inattention, delay, incompetence, inefficiency and ineptitude, in the administration or discharge
of duties and responsibilities;
(iii) repeated notices, unnecessary attendance or prolonged hearings while deciding cases involving-
(a) assessment of income or wealth;
(b) determination of liability of tax or duty;
(c) classification or valuation of goods;
(d) settlement of claims or refund, rebate or duty drawback; or
(e) determination of fiscal and tax concessions or exemptions.
(iv) wilful errors in the determination of refunds, rebates or duty drawbacks;
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(v) deliberate withholding or non-payment or refunds, rebates or drawbacks already determined by the
competent authority;
(vi) coercive methods of tax recovery in cases where default payment of tax or duty is not apparent from
record; and
(vii) avoidance of disciplinary action against an officer or official whose order of assessment or valuation is
held by a competent appellate authority to be vindictive, capricious, biased or patently illegal
Characteristics:
(i) Independent from executive
 All executive authorities throughout Pakistan shall act in aid of the Federal Tax Ombudsman.
(ii) Easy accessibility to the complainant
(iii) Impartiality and fairness
(iv) Credibility of review process
(v) Quick disposal
(vi) Implementation of recommendation, decision or order of Federal Tax Ombudsman mandatory duty of
Central Board of Revenue
Jurisdiction
The jurisdiction of the Federal Tax Ombudsman (FTO) extends to all Federal Taxes and the Revenue
Division being the administrative unit responsible for the conduct of the business of the Federal
Government, its Offices and agencies.
Exercise of jurisdiction
The jurisdiction can be exercised by the FTO:
(i) On a complaint by an aggrieved party
(ii) On a reference by the President
(iii) On a reference by the Senate
(iv) On reference by the National Assembly
(v) On a motion of the Supreme Court in a proceeding pending before it
(vi) On a motion of the High Court in a proceeding before it
(vii) On his own motion
The jurisdiction cannot be exercised into matters, which are
(g) Subjudic or
(h) relate to assessment of income, wealth, duty, tax liability, classification or valuation of goods,
interpretation of law rules and regulation in respect of which remedies of appeal reviews or
revision are available under the law and
(i)  Service matter of the employees or Revenue Division
Procedure for approach:
 Any aggrieved person can send his application/letter duly attested on solemn affirmation, written
on a plain paper. Anonymous complaints are not entertained.
 Compliant should be filed not later than six months from the date complainant had notice of the
matter. In special circumstances time can be extended by FTO.
 After scrutiny of complaint notice is issued to Central Board of Revenue (CBR) for reply. On
receipt of reply hearing is fixed and mostly cases are disposed on in 60 days except those, which
require recording of evidence or involve deeper investigation. Federal Tax Ombudsman makes
Recommendation/Finding.
Implementation of Recommendation/Finding:
Unlike similar statutes, this Ordinance provides:
"It shall be the duty of the Revenue Division and Tax Employees to implement the findings made
under Sections 11 and 12 within thirty days of such decision being communicated to the concerned Tax
Employees".
If the CBR fails to comply with the Recommendation/Findings within the specified time or does not
give reason to the satisfaction of the Federal Tax Ombudsman it is treated as Defiance of
Recommendation.
If there is a defiance of Recommendation by a Tax Employee;
The Federal Tax Ombudsman may refer the matter to the President who may in his discretion direct
the Revenue Division to implement.
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A report by the Federal Tax ombudsman shall become part of personal file or character roll of the Tax
Employee, primarily responsible for defiance.
Such Tax Employee shall be liable for contempt.
The Federal Tax Ombudsman has the same powers as the Supreme Court has to punish any person for
its contempt.
Reference
Any person aggrieved by the finding/Recommendation of the Federal Tax Ombudsman can file
representation to the President.
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Table of Contents:
  1. AN OVERVIEW OF TAXATION
  2. What is Fiscal Policy, Canons of Taxation
  3. Type of Taxes, Taxation Management
  4. BASIC FEATURES OF INCOME TAX
  5. STATUTORY DEFINITIONS
  6. IMPORTANT DEFINITIONS
  7. DETERMINATION OF LEGAL STATUS OF A PERSON
  8. HEADS OF INCOME
  9. Rules to Prevent Double Derivation of Income and Double Deductions
  10. Agricultural Income
  11. Computation of Income, partly Agricultural,
  12. Foreign Government Officials
  13. Exemptions and Tax Concessions
  14. RESIDENTIAL STATUS & TAXATION 1
  15. RESIDENTIAL STATUS & TAXATION 2
  16. Important Points Regarding Income
  17. Geographical Source of Income
  18. Taxation of Foreign-Source Income of Residents
  19. Exercises on Determination of Income 1
  20. Exercises on Determination of Income 2
  21. SALARY AND ITS COMPUTATION
  22. Definition of Salary
  23. Significant points regarding Salary
  24. Tax credits on Charitable Donations
  25. Investment in Shares
  26. SALARY AND ITS COMPUTATION EXERCISES 1
  27. SALARY AND ITS COMPUTATION EXERCISES 2
  28. SALARY AND ITS COMPUTATION EXERCISES 3
  29. Tax treatment of Gratuity
  30. Gratuity Exercise
  31. PROVIDENT FUND
  32. Exemptions on Business income, Treatment of Speculation Business
  33. Deductions Allowed & Not Allowed
  34. Deductions: Special Provisions, Depreciation
  35. Methods of Accounting
  36. Taxation of Resident Company
  37. Taxation of Companies: Exercises
  38. Computation of Capital Gain
  39. Disposals Not Chargeable To Tax
  40. TAX RETURNS & ASSESSMENT OF INCOME UNIVERSAL SELF ASSESSMENT SCHEME
  41. Normal Assessment, USAS, Provisional Assessment, Best Judgment Assessment
  42. ADVANCE TAX COLLECTION & RECOVERY OF TAX PENALTIES & PROSECUTION
  43. What is Value Added Tax (VAT)?
  44. SALES TAX
  45. SALES TAX RETURNS